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FDI policy and regulations applicable in various sectors
Summary of the policy on FDI (Foreign Direct Investment) was notified vide Press Note 4(2006).
Thereafter, further policy revisions were issued vide Press Note 5(2006) and PressNote 2 (2007) and 3(2007). A comprehensive review of the FDI policy was undertaken in2007-08 and the policy measures were notified vide Press Note 1-6 (2008).
FDI policy and regulations applicable in various sectors and activities after incorporatingthe policy changes up to 31-3-2008 is as below:
POLICY ON FOREIGN DIRECT INVESTMENT (as on 31st March 2008)
I. Sectors prohibited for FDI
i. Retail Trading (except single brand product retailing)
ii. Atomic Energy
iii. Lottery Business
iv. Gambling and Betting
v. Business of chit fund
vi. Nidhi Company
vii. Trading in Transferable Development Rights (TDRs).
viii. Activity/sector not opened to private sector investment
II. Sector-specific policy for FDI:
In the following sectors/activities, FDI is allowed up-to the limit indicated below subject to
other conditions as indicated.
Sr.
No.
Sector/Activity FDI Cap /
Equity
Entry
Route
Other conditions
I AGRICULTURE
1. Floriculture,Horticulture,
100% Automatic
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Development ofSeeds, AnimalHusbandry,Pisciculture,Aqua-culture and
Cultivation ofVegetables &Mushrooms undercontrolledconditions andservices relatedto agro and alliedsectors.
Note : Besides
the above, FDIis not allowed in
any other
agricultural
sector/activity
2. Tea Sector,including tea
plantation
Note: Besides
the above, FDI
is not allowed in
any other
plantation
sector/activity
100% FIPB Subject to divestment of26% equity in favour ofIndian partner/Indianpublic within 5 years andprior approval of StateGovernment concerned in
case of any change infuture land use.
II INDUSTRY
II
A
MINING
3. Mining covering
exploration and
mining of diamonds
& precious stones;
gold, silver and
minerals.
100% Automatic Subject to Mines &Minerals (Development &Regulation) Act, 1957ww w .mines.nic.in
Press Note 18 (1998) andPress Note 1 (2005) arenot applicable for settingup 100% ownedsubsidiaries in so far asthe mining sector isconcerned, subject to a
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declaration from theapplicant that he has noexisting joint venture forthe same area and /orthe particular mineral.
4. Coal & Lignitemining forcaptiveconsumption bypower projects,and iron & steel,cementproduction andother eligibleactivitiespermitted underthe Coal Mines
(Nationalisation)Act, 1973.
100% Automatic Subject to provisions ofCoal Mines(Nationalization) Act, 1973
www.coal.nic.in
5. Mining andmineral
separation of
titanium bearing
minerals and
ores, its value
addition and
integratedactivities .
Note : FDI will
not be allowed in
mining of
prescribed
substances
listed in
Government of
India notification
No. S.O. 61(E)
dt. 18.1.2006issued by the
Department of
Atomic Energy
under the
Atomic Energy
Act, 1962.
100% FIPB Subject to sectoralregulations and the Mines andMinerals (Development &Regulation) Act, 1957 and thefollowing conditions-
i. value addition facilitiesare set up within India
along with transfer oftechnology;
ii. disposal of tailing duringthe mineral separationshall be carried out inaccordance withregulations framed by theAtomic Energy RegulatoryBoard such Atomic Energy(Radiation Protection)Rules 2004 and the
Atomic Energy (SafeDisposal of RadioactiveWastes) Rules 1987.
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II B MANUFACTURING
6. Alcohol-
Distillation &
Brewing
100%
Automatic
Subject to license byappropriate authority
7. Cigars &Cigarettes-Manufacture
100%
FIPB
Subject to industriallicense under theIndustries (Development &Regulation) Act, 1951
8. Coffee&Rubber
processing &
warehousing
100%
Automatic
9. Defence
production
26%
FIPB Subject to licensing underIndustries (Development &Regulation) Act, 1951 and
guidelines on FDI inproduction of arms &ammunition.
10. Hazardous
chemicals, viz.,
hydrocyanic acid
and itsderivatives;
phosgene and its
derivatives; and
isocyanates anddiisocyantes ofhydrocarbon.
100% Automatic Subject to industriallicense under theIndustries (Development &Regulation) Act, 1951 andother sectoral regulations.
11. Industrial
explosives -
Manufacture
100% Automatic Subject to industriallicense under Industries(Development &Regulation) Act, 1951 andregulations underExplosives Act, 1898
12. Drugs &Pharmaceuticals
including those
involving use of
recombinant DNA
technology
100% Automatic
II C POWER
13. Power includinggeneration
100% Automatic Subject to provisions ofthe Electricity Act, 2003
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(except Atomicenergy);transmission,distribution and
Power Trading.
ww w.powermin.nic.in
III SERVICES
14. CIVIL AVIATION SECTOR
(i) Airports-
a . Greenfieldprojects
100% Automatic Subject to sectoralregulations notified byMinistry of Civil Aviationww w civilaviation.nic . in
b. Existing projects 100% FIPBbeyond
74%
Subject to sectoralregulations notified byMinistry of Civil Aviationww w .civilaviation.nic . in
(ii) Air Transport Services including Domestic Scheduled Passenger Airlines; Non-Schedules Airlines; Chartered Airlines; Cargo Airlines; Helicopter and Seaplane
Services
c.Scheduled Air
Transport
Services/
DomesticScheduled
Passenger
Airline
49%- FDI;
100%- for
NRI
investment
Automatic Subject to no direct orindirect participation byforeign airlines and
sectoral regulations..
d.Non-Scheduled
Air Transport
Service/ Non-
Scheduled
airlines,
Chartered
airlines, and
Cargo airlines
74%- FDI
100%- for NRIsinvestment
Automatic Subject to no direct orindirect participation byforeign airlines in Non-Scheduled and Charteredairlines. Foreign airlinesare allowed to participatein the equity of companies
operating Cargo airlines.Also subject to sectoralregulations.
e.
Helicopter
Services/Seaplan
e services
requiring DGCA
approval
100% Automatic Foreign airlines areallowed to participate inthe equity of companiesoperating Helicopter andseaplane airlines. Also
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subject to sectoralregulations.
(iii) Other services under Civil Aviation Sector
f.
Ground Handling
Services
74%-
FDI
100%-for NRIs
investmen
t
Automatic Subject to sectoral regulations
and security clearance.
g.
Maintenance
and Repair
organizations;
flying training
institutes; and
technical
training
institutions
100% Automatic
15. Asset
Reconstruction
Companies
49%
(only
FDI)
FIPB
Where any individual investmentexceeds 10% of the equity,provisions of Section 3(3)(f) ofSecuritization and Reconstructionof Financial Assets andEnforcement of Security InterestAct, 2002 should be complied with.ww w .finmin.nic.in
16. Banking -
Private sector
74%
(FDI+FII)
Automatic Subject to guidelines for setting up
branches / subsidiaries of foreignbanks issued by RBI. ww w .rbi.o r g.in
17. Broadcasting
a. FM Radio FDI +FII
investment
up to 20%
FIPB Subject to Guidelines notified byMinistry of Information &Broadcasting. ww w .mib.nic.in
b. Cable network 49%
(FDI+FII)
FIPB Subject to Cable TelevisionNetwork Rules (1994) Notified byMinistry of Information &Broadcasting. ww w .mib.nic.in
c. Direct-To-Home 49%(FDI+FII).
Within this
limit, FDI
componentnot toexceed
FIPB Subject to guidelines issued byMinistry of Information &Broadcasting. ww w .mib.nic.in
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20%
d. Setting up
hardwarefacilities
such as up-linking,
HUB, etc
49%
(FDI+FII)
FIPB Subject to Up-linking Policy notifiedby Ministry of Information &Broadcasting. ww w .mib.nic.in
e . Up-linking aNews
& Current Affairs
TV Channel
26%
FDI+FII
FIPB Subject to guidelines issued byMinistry of Information &Broadcasting. ww w .mib.nic.in
f. Up-linking a Non-
news & Current
Affairs TV
Channel
100% FIPB Subject to guidelines issued byMinistry of Information &Broadcasting. ww w .mib.nic.in
18. Commodity
Exchanges
49%
(FDI+FII)
InvestmentbyRegisteredFII underPIS will belimited to23% and
Investmentunder FDI
Schemelimited to26%.
FIPB FII purchases shall be restricted
to secondary market only.No foreign investor/entity,including persons acting in concert,will hold more than 5% of the equityin these companies.
19. ConstructionDevelopment
projects,
includinghousing,commercialpremises, resorts,educational
institutions,recreationalfacilities, cityand regionallevelinfrastructure,
townships.
100% Automatic Subject to conditions notified videPress Note 2(2005 Series) including:a. minimum capitalization of US$ 10million for
wholly owned subsidiaries andUS$ 5 million for joint venture.The funds would have to be
brought within six months ofcommencement of business ofthe Company.
b. Minimum area to bedeveloped under each project-10 hectares in case ofdevelopment of serviced housing
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Note:: FDI is not
allowed in Real
Estate Business
plots; and built-up area of50,000 sq. mts. in case ofconstruction developmentproject; and any of the above incase of a combination project.
[Not e 1 : For investment byNRIs, the conditions
mentioned in Press Note 2 /
2005 are not applicable.
Note 2: For investment in
SEZs, Hotels & Hospitals,
conditions mentioned in Press
Note 2(2005) are not
applicable]
20. Courier servicesfor carrying
packages,parcels andother itemswhich do notcome within theambit of theIndian PostOffice Act,1898.
100% FIPB Subject to existing laws andexclusion of activity relating to
distribution of letters, which isexclusively reserved for the State.ww w .indiapost.go v .in
21. Credit
InformationCompanies
49 %
(FDI+FII)InvestmentbyRegisteredFII underPIS will belimited to24% only inthe CICslisted atthe Stock
Exchangeswithin theoverall limitof 49%foreigninvestment.
FIPB
Foreign Investment in CIC will be
subject to Credit InformationCompanies (Regulation) Act, 2005.
FII investment will be subject tothe conditions that:
(a) No single entity should directlyor indirectly hold more than 10%equity
(b) Any acquisition in excess of 1%will have to be reported to RBI asa reporting requirement; and
(c) FIIs investing in CICs shall notseek a representation on the Boardof Directors based upon theirshareholding.
22. Industrial Parksboth setting up
100% Automatic Conditions in Press Note 2(2005)applicable for construction
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and in
established
Industrial Parks
development projects would notapply provided the IndustrialParks meet with the under-mentioned conditions-
i. it would comprise of a minimum
of 10 units and no single unit shalloccupy more than 50% of theallocable area;
ii. the minimum percentage of thearea to be allocated for industrialactivity shall not be less than 66%of the total allocable area.
23 Insurance 26% Automatic Subject to licensing by theInsurance Regulatory &Development Authority
www.irda.nic.in
24. Investing
companies in
infrastructure /
services sector
(except telecom
sector)
100% FIPB Where there is a prescribed capfor foreign investment, only thedirect investment will beconsidered for the prescribed capand foreign investment in aninvesting company will not be setoff against this cap provided theforeign direct investment in suchinvesting company does notexceed 49% and the management
of the investing company is withthe Indian owners.
25. Non Banking Finance Companies
i)
ii)
iii)
Merchant
Banking
Underwriting
Portfolio
Management
Services
Investment
Advisory
Services
Financial
Consultancy
100% Automatic Subject to:
a. minimum capitalization normsfor fund based NBFCs - US$0.5 million to be broughtupfront for FDI up to 51%;US$ 5 million to be broughtupfront for FDI above 51% andup to 75%; and US$ 50 millionout of which US$ 7.5 million tobe brought upfront and thebalance in 24 months for FDIbeyond 75% and up to 100%.
b. minimum capitalization normsfor non-fund based NBFCactivities- US$ 0.5 million.
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iv)
v)
vi)
vii)
viii)
ix)
x)
xi)
xii)
xiii)
xiv)xv)
xvi)
Stock Broking
Asset
Management
Venture Capital
Custodial
Services
Factoring
Credit Rating
Agencies
Financial Leasing
& Hire Purchase
Finance
Housing
Finance
Forex Broking
Credit card
Business
Money
changing
business
Micro credit
Rural credit
c. foreign investors can set up100% operating subsidiarieswithout the condition todisinvest a minimum of 25% ofits equity to Indian entities
subject to bringing in US$ 50million without any restrictionon number of operatingsubsidiaries without bringingadditional capital.
d. joint venture operatingNBFCs that have 75% or lessthan 75% foreign investmentwill also be allowed to set upsubsidiaries for undertakingother NBFC activities subject
to the subsidiaries alsocomplying with the applicableminimum capital inflow.
e. compliance with theguidelines of the RBI.
f. The minimum capitalizationnorms would apply would beapplicable where the foreignholding in a NBFC(both directand indirect) exceeds thelimits indicated at (a) above
g. The capital for the purposeof minimum capitalization normsshall consist of ordinary sharesonly.
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xvii)
xviii)
26. Petroleum & Natural Gas sector
a. Refining 49% incase ofPSUs100% incase ofPrivate
companies
FIPB(in case ofPSUs)
Automatic(in case ofprivate
companies)
Subject to Sectoral policywww.petroleum.nic.in and nodivestment or dilution of domesticequity in the existing PSUs.
b. Other thanRefining andincluding marketstudy andformulation;investment/financing; settingup infrastructurefor marketing inPetroleum &
Natural Gassector.
100% Automatic Subject to sectoral regulationsissued by Ministry of Petroleum &Natural Gasww w .petroleum.nic.in
27. Print Media
a. Publishing ofnewspaper and
periodicals
dealing withnews andcurrentaffairs
26% FIPB Subject to Guidelines notified byMinistry of Information &Broadcasting. ww w .mib.nic.in
b. Publishing ofscientific
magazines/
specialty
journals/
periodicals
100% FIPB Subject to guidelines issued byMinistry of Information &Broadcasting. ww w .mib.nic.in
28. Telecommunications
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a. Basic and
cellular, Unified
Access Services,
National/
InternationalLong Distance,
V-Sat, Public
Mobile Radio
Trunked
Services
(PMRTS),
Global Mobile
Personal
Communications
Services(GMPCS) and
other value
added telecom
services
74%
(Including
FDI, FII,
NRI,
FCCBs,ADRs,
GDRs,
convertible
preference
shares, and
proportio-
nate
foreign
equity in
Indianpromoters/
Investing
Company)
Automatic
up to
49%.
FIPB
beyond
49%.
Subject to guidelines notified in thePN 3(2007)
b. ISP with
gateways, radio-
paging, end-to-
end bandwidth.
74% Automatic
up to 49%.
FIPB
beyond
49%.
Subject to licensing and securityrequirements notified by the Dept.of Telecommunications.
ww w .dotindia.com
c. (a) ISP without
gateway,
(b) infrastructure
provider
providing dark
fibre, right ofway,ductspace,tower(Category I);
(c) electronic
mail and voice
100% Automatic
up to49%.
FIPB
beyond
49%.
Subject to the condition thatsuch companies shall divest 26%of their equity in favour ofIndian public in 5 years, if thesecompanies are listed in otherparts of the world. Also subject
to licensing and securityrequirements, where required.ww w .dotindia.com
d. Manufacture of 100% Automatic Subject to sectoral requirements.
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31. Special
Economic Zones
and Free Trade
Warehousing
Zones covering
setting up ofthese Zonesand settingup units inthe Zones
100%
Automatic Subject to Special Economic ZonesAct, 2005 and the Foreign TradePolicy.
ww w .sezindia.nic.in
II. In Sectors/Activities not listed above, FDI is permitted up to 100% on the
automatic route subject to sectoral rules/ regulations applicable.
III. Prior Government approval for FDI required in the followingcircumstances:
i) where provisions of Press Note 1 (2005 Series) issued by the Government ofIndia are attracted;
ii) where more than 24% foreign equity is proposed to be inducted for manufactureof items reserved for the Small Scale sector.
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